Abstract:

This study aims at investigating the quantifiable effect of credit risk on the performance of listed banks in the sultanate of Oman over the period of 10 years (2010-2019). The analysis of this study is based on Secondary data extracted from the Muscat Securities Market (MSM). Panel data has been employed in this study. Return on Assets (ROA) and Return on Equity (ROE) are the performance indicators and Bank specific variables like Non-performing loans, size of the bank and oil price have been taken as indicators of inherent credit risk .The study employed Random effects model to analyze the time series data. The result showed that the quality of the assets on the balance sheet and the inherent credit risk have an inverse relation whereas the bank size had not significant relationship with ROA and ROE.

Oil prices has an effect on ROE but not on ROA. As Oil prices cannot be controlled by the banks, they need to focus more on alleviating themselves by controlling, regulating and monitoring the non-performing loan book. Banks are recommended to adhere to highest standard of credit appraisal ensuring lending to credit worth borrowers with the highest ratings